ANN ARBOR—Consumer sentiment was slightly below last month's decade high, but has remained in the narrow positive range it has traveled since the start of the year, according to the University of Michigan Surveys of Consumers.

What has recently changed is the degree of certainty with which consumers now hold their economic expectations, said U-M economist Richard Curtin, director of the surveys. Inflation expectations have shown the smallest dispersion on record, and increased certainty about future income and job prospects has become a key factor that has supported discretionary purchases.

To be sure, incomes are expected to increase only modestly, and unemployment is anticipated to decline only marginally from its current low, Curtin said. Given that the average level of consumer confidence in 2017 has been higher than anytime since 2004, it represents the best runup to the holiday shopping season for retailers in a decade.

"In contrast to the media buzz about approaching cyclical peaks and an aging expansion, with the implication of greater uncertainty about future economic trends, consumers have voiced greater certainty about their expectations for income, employment, and inflation," Curtin said.

"Some caution is warranted given that the current expansion will soon be the second longest expansion since the mid-1800s, as well as the potential for significant changes in tax policies and new Fed leadership. Importantly, the data indicate that these changes in fiscal and monetary policies have yet had any noticeable impact on consumer expectations. The data still point toward real spending growth of 2.7 percent during 2018."

Favorable Personal FinancesHalf of all consumers reported improved finances in November as they have throughout 2017, marking the best year since 2000. When asked to explain recent changes to their finances in their own words, on average during 2017, 37 percent cited income gains, also the highest proportion since 2000.

Income gains of 2.1 percent were anticipated in the year ahead across all households in the past two months, the highest since 2008. Moreover, household wealth benefited from increases in home and stock values during the past year.

Greater Certainty Benefits Discretionary PurchasesAfter asking their overall assessment of buying conditions for homes, vehicles and household durables, consumers are asked to explain their views. While references to prices and interest rates typically dominate their responses, increased certainty about future job and incomes has recently risen to its highest levels since 2000.

Future job and income prospects determine the willingness of households to draw down savings or increase debt to make discretionary purchases. To be sure, consumers still remain cautious about increasing their indebtedness as they still hold fast to the lessons learned in the Great Recession about its risks and potential consequences.

Consumer Sentiment IndexThe Consumer Sentiment Index was 98.5 in the November 2017 survey, between the decade peak of 100.7 in October and last November's 93.8. The Current Conditions Index was 113.5 in November, below October's 116.5, which was the highest level since 2000. The Expectations Index was 88.9 in November, between last month's 90.5 and last year's 85.2.

The Surveys of Consumers is a rotating panel survey based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted throughout the month by telephone. The minimum monthly change required for significance at the 95-percent level in the Sentiment Index is 4.8 points; for Current and Expectations Indices the minimum is 6 points.